(Adds analyst comment, Dollar General response, updates shares)
By Siddharth Cavale
Sept 5 Family Dollar Stores Inc rejected
Dollar General Corp's sweetened takeover bid, saying the
offer still did not address antitrust concerns, raising the
prospect that the No. 1 U.S. deep discount chain will go
"hostile" with its offer.
Dollar General raised its offer for Family Dollar Stores on
Tuesday by 2 percent to $9.1 billion, or $80 per share, and said
it was willing to sell up to 1,500 stores to clear any antitrust
Dollar General also offered to pay $500 million as break-up
fee and warned it may take the offer directly to Family Dollar's
shareholders if it was spurned again.
"There is a very real and material risk that the transaction
proposed by Dollar General would fail to close, after a lengthy
and disruptive review process," Family Dollar Chief Executive
Howard Levine said in a statement on Friday.
Family Dollar last month rebuffed Dollar General's initial
all-cash offer on antitrust concerns and said it would stick
with an $8.5 billion, or $74.50 per share, cash-and-stock offer
from Dollar Tree Inc.
Dollar General said on Friday it would continue to pursue
its smaller rival and was evaluating its next steps.
"While we are hard pressed at this point to predict the next
chapter in this ongoing soap opera, we think Dollar General is
likely to come back to the table with a revised proposal, which
will probably contain its own "hell or highwater" provisions,"
BB&T Capital Markets analyst Anthony Chukumba wrote in a note.
Dollar General's shares were down 2.9 percent at $62.55,
while Family Dollar was down 1.6 percent at $78.80 in afternoon
Dollar Tree said on Friday it amended its merger agreement
with Family Dollar to include a commitment to divest as many
stores as necessary to clear antitrust hurdles. It had
previously agreed to divest 500 stores.
Family Dollar, the second-largest U.S. dollar store chain,
said it expects the Federal Trade Commission to challenge a deal
with Dollar General as it could lead to higher prices in areas
where only the two are present.
Dollar General has played down antitrust concerns, saying
that Wal-Mart Stores Inc was the primary driver for its
pricing decisions, not Family Dollar.
But Family Dollar said shedding just 1,500 stores was not
"Dollar General and Family Dollar compete in thousands of
local geographies, with more than 6,000 Family Dollar stores
competing with a Dollar General store within three miles," the
company said. "Many of these stores - far more than 1,500 - do
not have a Wal-Mart within the same distance."
Dollar Tree's bid is friendlier to Family Dollar's
management. Under the agreement, Levine will remain CEO of
Family Dollar if it was bought by Dollar Tree.
But he is widely expected to lose his job if Dollar General
succeeds in buying Family Dollar, although this has not been
Dollar Tree also said on Friday it expected the Federal
Trade Commission to issue a "second request" for additional
information on Sept. 8. The company said it now expects the deal
to close by November 2014, well before its earlier forecast of
Dollar Tree shares were up 0.3 percent at $55.21.
(Additional reporting by Yashaswini Swamynathan; Editing by
Sriraj Kalluvila and Saumyadeb Chakrabarty)